Efforts by Serbia and Montenegro to begin the process of integration into Europe, address issues of the country’s future status—including that of the restive province of Kosovo—face up to corruption and war crimes, and deal with the economy dominated headlines in 2005. In October the International Monetary Fund temporarily suspended high-level talks with Belgrade following disagreements over Serbia’s monetary and public-spending policies and the country’s higher-than-planned inflation rate of 17%. The negotiations aimed at extending a nearly $1 billion standby credit arrangement were crucial for Serbia’s transition process because they were linked to a $730 million debt write-off by the Paris Club of creditors, which had already canceled $2.3 billion of Serbia’s $13 billion debt. In response Serbia’s government approved a 2006 budget proposal of $6.9 billion, calling for more spending cuts in health services, aid to state-run companies, and salaries in the public-services sector. The government projected a surplus in 2006 of $560 million, compared with the budget deficit of $533 million the previous year. Serbian Deputy Prime Minister Miroljub Labus announced in November that he expected that Serbia and Montenegro would sign its first contract with the EU by November 2006. The International Criminal Tribunal for the Former Yugoslavia (ICTY), however, gave Serbia a strong warning that Belgrade had to deliver Bosnian Serb war-crimes fugitive Ratko Mladic by the end of the year or face “excommunication” from any Euro-Atlantic integration process.

Officials contended that the main obstacles for economic development in Serbia were unemployment and the lack of investments, compounded by political issues such as cooperation with the ICTY, the status of Kosovo, and relations with Montenegro. In November a European Commission report found that economic growth in Serbia and Montenegro had improved, but problems regarding human rights, freedom of expression, corruption, and “inappropriate political interference” in the courts interfered with the country’s development.

Media intimidation and intolerance of ethnic and religious minorities increased somewhat. Journalists and nongovernmental organizations investigating Serbia’s role in the wars that led to the dissolution of Yugoslavia were frequently threatened, beaten, and harassed by right-wing extremists and hooligans. Incidents involving discrimination were largely ignored by officials, and talk of independence for Kosovo and Montenegro increased fears that the northern province of Vojvodina, with more than 20 different ethnic groups, might also seek to leave Serbia. Serbia’s Jewish community reported an increase in anti-Semitism.

In November the government of Serbia brought criminal charges against 40 judges in an effort to fight corruption. Media and reformers repeatedly accused government prosecutors of serving the interests of politicians. The most publicized case came in August, when charges of extortion against Marko Milosevic, the son of former Serbian president Slobodan Milosevic, were dropped. A damning government report in September alleged the acquisition of military equipment by top Montenegrin officials and further damaged the already-tense relations between Serbia and Montenegro. It was widely expected that a referendum on Montenegro’s future status would be held in April 2006.

Public support for Serbian right-wing nationalists remained strong. According to several polls, the Serbian Radical Party of indicted war criminal Vojislav Seselj, which held the largest bloc of seats in Parliament, was the most popular, with Serbian Pres. Boris Tadic’s Democratic Party a distant second and Serbian Prime Minister Vojislav Kostunica’s Democratic Party of Serbia in either third or fourth place. In October Tadic recommended new parliamentary elections, alleging that the governing coalition under Kostunica had lost the trust of the voters and the government was “unstable.”

Kosovo’s political landscape remained polarized, despite efforts by the international community to broker a peaceful settlement over the future status of the province. Kosovo Pres. Ibrahim Rugova and Prime Minister Bajram Kosumi stressed that the province would accept nothing less than full independence after the completion of UN-sponsored final-status talks. Several proposals, notably from within the EU, had called for “conditional independence” for Kosovo, which would not enjoy full sovereignty until it joined the EU and adopted its rules and restrictions. Serb political leaders in Kosovo were divided about how to approach the negotiations, and even Tadic was not immune from using nationalist rhetoric. On a visit to a Kosovo Serb enclave in February, he stated that “this [Kosovo] is Serbia” and emphasized that independence for the predominantly Albanian-populated province was “unacceptable.” Kostunica said Belgrade would grant Kosovo broad autonomy but warned that outright independence could provoke a major crisis.

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